“For Sale by Owner” Homes Sell for 13% Less – Why?

You may have heard that homes offered “For sale by owner” sell for 13% less than homes listed with a real estate brokerage. For years we’ve heard that it was simply a difference in the value of the homes. The feeling was that people with lower priced homes were more likely to want to save the cost of the commission.

Recent research from the National Association of Realtors suggests different reasons. First and probably most significant is that homes listed with agents get extensive Internet coverage while “for sale by owner” homes get little to none. With 92% of home buyers now searching on line, those homes are simply “not seen” by the majority of home buyers and are not given the benefit of marketplace competition. Research shows that 44% of homes sold by owner are sold to people already acquainted with the seller. Does that make the seller less likely to press for market value? Or is it because those sellers don’t have access to the latest sales figures and thus don’t KNOW the market value?

The unfortunate thing about this kind of research is that it doesn’t answer all of the questions. Only about 15% are sold to people who approached the seller directly. The rest went to buyers who were represented by an agent – very likely an agent who is well-practiced and skilled in negotiating with sellers. That may be another reason why unrepresented homeowners sell for less. The real estate commission on a sale of a home is usually between 5% and 7%. The average “loss” to a homeowner for selling without an agent is 13%. Of course averages are just averages. Some homeowners do save some or all of that 5 to 7%. Others lose far more than the 6 to 8% difference between the commission and the reduction in price.

Of course, the ultimate selling price is only part of what homeowners need to consider before making the decision to hire an agent or go it alone. The other factor is the work involved. Without an agent, sellers have to do their part in keeping the house ready to show; then they have to do the agent’s part in showing, advertising, negotiating, and monitoring the details of a transaction.

Which path is right for you as you ponder the sale of your Central Florida home? It’s a question that deserves careful consideration.

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